Forex news from the European morning session - 17 March 2020
Headlines:
- Fed's Kashkari: Not much interest in rates below zero
- Mnuchin reportedly to seek package of $850 billion or more in stimulus later today
- Germany March ZEW survey current situation -43.1 vs -30.0 expected
- The funding squeeze is arguably the key story in the market this morning
- UK January average weekly earnings +3.1% vs +3.0% 3m/y expected
- Hong Kong jobless rate jumps to highest since 2011
- European bond yields continue to rise over the past week
- Thailand next in line to close schools to curb virus spread
- France's Le Maire says government will spend €45 billion to support the economy
- BOJ's Kuroda: Moves in financial markets very unstable
- South Korea says it will announce steps to ease dollar funding shortage
- South Korea extends school closures by two more weeks to 6 April
Markets:
- USD leads, AUD lags on the day
- European equities lower; E-minis up 0.5%
- US 10-year yields up 6 bps to 0.78%
- Gold down 2.9% to $1,469
- WTI up 1.8% to $29.20
- Bitcoin up 7.8% to $5,285
The dollar is steamrolling the major currencies bloc in trading today as funding pressures blew up in the European morning session.
EUR/USD 3-month cross currency basis saw its spread widen to levels last seen since 2011 as borrowing for the dollar turns more expensive amid the surge in demand.
As such, the story of the day was rather simple as the greenback rose against every major currency with EUR/USD falling from 1.1150 to 1.1000. Meanwhile, cable fell to fresh lows since September last year back under 1.2100.
USD/CAD surged from 1.3990 to 1.4150 while AUD/USD fell from 0.6100 to its lowest level since 2003 - back under the 0.6000 level briefly.
Amid the funding squeeze, European equities saw early gains wiped out as stocks turned 2-3% gains into 2-3% losses with US futures also being humbled after hitting limit up earlier.
S&P 500 futures erased gains in the span of an hour to fall by more than 1% before recouping some ground as we look towards North American trading now.
Although the market is heavily focused on the funding squeeze right now, let's not forget about the economic fallout from the virus outbreak as more and more countries are stepping up precautionary and lockdown measures.
Hong Kong saw its jobless rate spike to its highest level since 2011 in perhaps an early sign of things to come elsewhere. Looking ahead today, there is also the focus on US stimulus measures so let's see how that all plays out.
